Dairy Pakistan

Livestock economy Demand for dairy products

Consumption of dairy products Market demand Consumption trends Consumer preferences Livestock inventory Milk production & productivity Milk production & productivity trends Supply demand gaps for dairy products

Supply of dairy products

Marketing of dairy products

Milk and meat marketing Hide, skin & wool marketing

Dairy supply/value and Constraints Issues of dairy industry in Pakistan

Background
Livestock Economy
49.6% of agri. value added and 10.4% of GDP (> major + minor crops)

30-35 million rural population engaged in LST farming

Livestock population

Cattle (29.6 mill.), Buffalo (27.3 mill.), Sheep (26.5

mill.), Goat (53.8 mill.), Others (4.84 mill.) Livestock products

Milk (38Mt), Beef (1.24 Mt), Mutton (0.83 Mt),

Poultry meat (0.514Mt), Eggs (9.62 mln.),

Exports about 12% of total export earnings

Demand for dairy products

Item (Ltr) Fresh milk cow Fresh milk buffalo Fresh milk mix Pasturized milk UHT milk Infant formula Powder milk Punjab 2.67 8.27 0.59 0.05 0.90 0.00 0.04 NWFP 1.40 3.96 1.77 0.18 1.10 0.02 0.05 Sindh 1.53 6.23 0.05 0.08 1.15 0.00 0.06 Balochistan 0.16 4.59 0.10 0.00 1.18 0.00 0.02 Isd. 5.50 0.00 0.00 0.47 3.21 0.06 0.10

(ctc)

Per capita consumption milk by provinces liters/month 2007

All 2.19 6.38 0.57 0.10 1.15 0.01 0.05

Flavor milk
Total milk

0.00
11.76

0.00
7.60

0.00
7.93

0.00
4.95

0.01
5.60

0.00
9.36

Source: FAO 2007

Demand for dairy products

Per capita consumption of dairy products (liter/month) 2007
Per capita consumption per month (liter) Yogurt fresh Yogurt UHT Flavoured Yogurt Cottage Cheese Processed Cheese Butter(Fresh) Butter (Processed) Khoyia Quantity Sweet/Desert Desi ghee Cream Quantity Ice Cream Quantity Rubbery consumption Malai Quantity Lassi Quantity Liquid Milk Equivalent Per Month (LME)
Note: LME includes both all types of milk and milk products

Low 0.62 0.05 0.00 0.00 0.00 0.03 0.01 0.00 0.00 0.04 0.01 0.03 0.00 0.00 0.00 11.58

Middle 1.04 0.09 0.00 0.00 0.00 0.07 0.07 0.03 0.02 0.07 0.01 0.08 0.00 0.00 0.03 16.42

High 0.98 0.28 0.01 0.01 0.01 0.07 0.09 0.04 0.03 0.06 0.03 0.16 0.00 0.00 0.00 19.66

All 0.89 0.12 0.00 0.00 0.00 0.06 0.06 0.03 0.02 0.06 0.02 0.09 0.00 0.00 0.01 15.66

Source: FAO 2007

Urban Demand for LME Liters 2007

Categories Province /Federal Punjab Sindh NWFP Balochistan Islamabad PAKISTAN

Per capita/ annum (LME)

205.26 174.64 156.17 155.97 224.87 187.89

Urban population (m)

33.61 13.89 8.10 2.99 0.37 60.41

Urban demand for LME (b)

6.90 2.43 1.26 0.50 0.08 11.35

OVERALL DEMAND FOR MILK IN PAKISTAN Urban milk consumption Overall milk consumption Population Demand for milk =188 liters/capita/yr = 211 liters/capita/yr = 160 million = 33.76 bl liters/yr

PER CAPITA CONSUMPTION TRENDS (Kgs)

Countries Meat 1983 1993 2007 2020 Developed Developing Pakistan 74 14 11 < 76 21 16 < 16.2 83 30 47 > 1983 195 35 51 > Milk 1993 192 40 65 > 2007 2020 211 189 62 245 >

Messages: Meat consumption will be higher in 2020 than DC Milk consumption is higher than DC but gap would increase further
(FAO, 2003, ILRI 1999)

PER CAPITA CONSUMPTION TRENDS (Kgs) . Diversification of diets meats, eggs and dairy products Population growth, urbanization and income growth Derived Demand -- creating a veritable livestock revolution New and expanding markets for small livestock producers However, inappropriate policy and misallocation of investment resources could skew the distribution of benefits and opportunities demand for livestock products will lead to intensification of small holders food and feed production system and may

provide an engine for sustainable livestock production

Consumer Preferences for Fresh Milk (% Responses) Preferences

Taste Good Quality Low Price Family Choice Easy Availability Freshness More Nutritious(fat) Good for Drink Good for Tea Good for Dessert Other (SP) Low Spoilage
Source: FAO 2007

Cow
11 18 19 11 14 7 9 3 7 0 0 2

Buffalo
31 19 15 9 7 8 4 2 2 2 1 0

Sample HHs=2616 Pb=1224 Sd=407 NWFP=679 Bl=155 Isbd=151

Consumer preferences for UHT Milk (% Responses)

Provinces Preferences Good Quality Taste Good for Tea Easy Availability More Nutritious (fat) Family Choice Low Price Good for Drink Low Spoilage Good for Dessert Freshness Sales Promotion Other (SP) Punjab 22 20 10 11 7 9 5 2 1 1 0 0 11 NWFP 17 13 9 15 12 2 13 0 3 2 1 1 14 Sindh 23 28 13 4 8 5 3 6 5 1 0 0 2 Baloch. 12 30 13 21 6 4 1 6 1 5 1 0 0 Islamabad 27 20 17 9 7 6 2 6 2 0 1 0 2 Overall 22 21 12 10 8 7 5 3 2 1 1 0 8

Source: FAO 2007

Responses for market types for fresh milk (%)

Market Types Home Delivery Sales Point Grocery/General Store City Centre Local Market Own Animal Punjab 68 21 0 0 5 4 NWFP 67 14 3 1 5 1 Sindh 69 6 3 0 17 3 B.tan 56 6 18 1 16 1 All 68 15 3 0 9 3

Others(Dairy Farm)

Source: FAO 2007

Awareness responses about milk adulteration (%)

Provinces Adulterants Punjab 68 84 8 NWFP 78 67 17 Sindh 76 78 9 Baloch. 75 84 8 Islamabad Overall

Awareness Yes%) Dirty water Ice

80 85 8

75 75 11

Surf
White cement

3
2

0
2

1
0

3
2

4
3

2
2

Oil
Corn Flour Other
Source: FAO 2007

1
1 1

1
9 4

0
7 5

1
1 1

1
8 2

Livestock Inventories, 2006 (million)

Country/ province
Pakistan Punjab Sindh NWFP Balochistan

Cattle
29.56 14.48 (49) 6.80 (23) 5.91 (20)

Buffaloes
27.33 17.76 (65) 7.38 (27) 1.91 (7)

Sheep
26.49 6.36 (24) 3.97 (15) 3.44 (13) 12.72 (48)

Goats
53.79 19.90 (37) 12.37 (23) 9.68 (18) 11.83 (22)

Others
5.69 2.65 (47) 1.36 (24) 0.76 (13) 0.91 (16)

Total
142.86 61.16 (43) 31.89 (22) 21.71 (15) 28.10 (13)

2.36 0.27 (8) (1) Agriculture Censes, 2006 Figure in parenthesis are percentage

Livestock Population growth trends

50000 PO 40000 PU LA TI 30000 O N (00 20000 0) 10000 0 1955 1960 1972 1976 CENSUS YEAR 1986 1996 2006

Cattle Buffaloes Sheep Goats

Source: Economic Survey of Pakistan, 1955-2006 C>B in beginning of 1955; C>B reached peak in 1960; B>C in 1996 but in 2006 C>B Source: Hasnain & Khan 2007

MILKING POPULATION, 2006

(Million) Animals Cow > 3 years In milk cows Pakistan 15.16 8.72 Punjab 7.376 (49) 4.05 (46) Sindh 3.656 (24) 2.143 (25) NWFP 3.038 (20) 1.87 (21) Baloch. 1.086 (7) 0.6526 (7)

Buffaloes > 3 year

In milk

15.56
10.22

9.896 (64)
6.233 (61)

4.393 (28)
3.051 (30)

1.090 (7)
0.808 (8)

0.184 (1)
0.130 (1)

Agriculture Censes, 2006 Figure in parenthesis are percentage

Milk production by provinces 2006

38.37
Punjab 22.50 58 %

Sind
10.19 26.3%

Bal 1.18 3.1%

NWFP
4.48 11.6%

Source: Economic Survey of Pakistan 2006-07

Milk production trends by species

Type of animal Gross annual production (Billion Liters) 1986 Cows 7.07 1996 9.36 2006 13.33 % Change Between 1986&1996 32.4 1996&2006 42.4

Buffaloes
Total Goats

14.82
21.89 -

18.90
28.26 -

25.04
38.37 0.32

27.5
29.1 -

32.5
35.6 -

Source: Economic Survey of Pakistan 2006-07 Ave. Annual Lactation length of 250, 305 and 50 days for cows, buffaloes and goats

MILK PRODUCTIVITY
Years No. of dairy farms (million) Average milk animal/farm T. milk/farm/yr) L. milk/ Animal/yr

1996 1998 2000 2001 2002

11.3 11.9 12.7 13.0 13.4

1.9 1.8 1.8 1.8 1.8

2.37 2.36 2.35 2.35 2.35

1247.4

2003
2004 2005 G. Rate % (2000-05)

13.8
14.2 14.7 3.0

1.8
1.8 1.8 -0.4

2.34
2.34 2.34 -0.1
Farm growth nearly stable

1300

IFCN, Dairy Report, 2007:

ENERGY CORRECTED MILK PRODUCTVITY

Years Milk production (mill.t) Cows & buffaloes (in million) Milk yield (t/cow/yr)

1996 1998
2000 2001 2002 2003

26.6 28.1
29.7 30.6 31.5 32.4

20.9 22.0
23.3 23.8 24.5 25.1

1.27 1.28
1.28 1.28 1.29 1.29

2004
2005 G. Rate % (2000-05)

33.4
34.4 2.9

25.7
26.4 2.5

1.30
1.30 0.4

IFCN, Dairy Report, 2007: ECM = Energy Corrected Milk with 4% fat and 3.3% protein

Milk production kgs/animal/lactation

Country Bangladesh Bhutan Cattle 207 257 Buffalo 407 400

India
Nepal Pakistan Siri Lanka Australia New Zeland Australia
PDDC 2006

987
415 1195 627 4926 3947 4926

1450
850 1909 496

Production trends of dairy products

Economic survey of Pakistan 2006-07

KEY FEATURES OF MILK PROCESSING SECTOR, 2005 Processors Capacity Capacity utilization Average (million monthly Flush Lean liters)
Nestle HFL Milac Vita Halla Prime Nurpur Nirala Dairy crest Engro K&K Butt Dairies Munno Daires Khi Dairies Military 1.3 0.9 0.3 0.05 0.15 0.1 0.15 1 0.15 0.35 0.4 0.06 0.02 0.1 0.18 1.3 0.9 0.3 0.03 0.15 0.1 0.15 0.1 0.15 0 0 0.06 0.02 0 0.18 0.78 0.54 0.18 0.018 0.09 0.06 0.09 0.6 0.09 0 0 0.036 0.012 0 0.108 1.04 0.72 0.24 0.024 0.12 0.08 0.12 0.08 0.12 0 0 0.048 0.016 0 0.144

Total
PDDC, 2006

5.3

3.44

2.064

2.752

MILK PROCESSING AND PRODUCTS, 2006

Fresh & dry milk processing plants
Fresh milk processed (buffalo & cows) Dry milk used Dairy products
UHT milk Low fat milk High fat milk Pasteurized milk Flavored milk Powder milk Condensed milk Milk cream Yogurt Butter No. of persons employed Large Medium Small

= 24
= 16 =2 =1

= 992 mln. liters = 12.5 mln.kgs

= = = = = = = = = = = 472.2 mill. liters 10.90 mill. Liters 28.80 mill. Liters 5.20 mill. Liters 3.20 mill. Liters 37.40 mill. Kgs 1.70 mill. Kgs 26.60 mill. Kgs 10.10 mill. Kgs 4.70 mill. Kgs 5653 personnel

Ratio of fresh milk processed with net milk

production from buffalo and cows

= 3.23%

Agricultural Censes Commissioner, 2007

Demand and supply situation in Pakistan

100
90 Index of production and consumption 80 70 60 50 40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Demand Excess supply converted to ghee, khoya, butter, powder etc

100
90 Excess supply converted to ghee, 80 Khoa, butter, powder etc 70 60 Supply 50 40

Reconstituted + powder Water

Index of production and consumption

Excess demand met by reconstitued powder and diluted milk

Supply + water

Months

Source: Hasnain & Khan 2007

MILK MARKETING CHANNLES

Rural Producer (80%) Rural Commercial
10% 10%

Peri Urban Producer (15%)

80% 5% 15% 5% 20%

Urban Producer (5%)

Rural Subsistence
90%

Assembler
85%

Wholesaler
5%

5% Confectioners

90%

Retail Milk Shop

Processing Plants
100%

15% 100% 85%

Bakers

Wholesale market

100%

Retail Store

100%

Consumer

FAO, 2003 Improper milk collection system, Un-hygienic milk handling & Adulteration

 Home delivery/gawalasretail milk shops/milk shops

DAIRY SUPPLY CHAIN Urban Dairy Markets

(Demand Perspective)

68 percent urban consumer

reported that they are getting milk at home through milkmen/Gawalas

Milk shops/retail shops - 16% purchased milk from local

Milk sale points- 10% purchase milk from these sale points General stores/super markets- 4% from these general
stores and the super markets

Own animals- Only two percent of urban consumers get milk from
their own animals in big cities, cities and towns

 Milk producers: 8 m FHHs with herd size 50 m milch animals, spread across Milk collectors (Dhodies): SSMC-200-400 kg/day from remote areas, De-creamers and khoya markers: milk men stay with
decreamers & Khoya makers on way to town/cities. Some SSMC sell milk to decreamers, decreamers sell part to halwaies & confectioners
long term contracts at predetermined price offering a share of milk price in advance. MSMC400-800 kg/day with a similar manner, carryout door to door milk delivery and sell in some nearby market. LSMC- > 1500-3000 kg/day, purchase from SSMC & MSMC, sell to retail shops, adulteration is practiced by LSMCs
1000 sq.km- 43% with 1-2 animals, 28% 3-4 animals-Producing 80% milk.

Participants of dairy supply chains

Milk processors: small share Consumers Government organizations: PDDC, PDDB, AHComm. (Fed),

L&DDD (Prov). PSDP-Project (Milk collection processing dairy production and dev. Program)-Subsidized livestock services for milk collection and marketing, development of genetically superior animals

Fresh milk supply chain for milk collectors

Small Scale Milk Collectors (Rs. 18-22/kg)
Milk Shops/ Sale Point (Rs. 24-

35/kg)

Rural Dairy Producers (Rs. 1618/kg)

Large Scale Milk Collectors (Rs. 22-32/kg)

Urban Consumers

Medium Scale Milk Collectors (Rs. 18-22/kg)

Constraints Associated in Retail Fresh Milk Supply Chain

The product sub-system: Poor quality milk (poor milk production system, poor skills of handling, storage and transport system of unhygienic milk). The quality of milk is deteriorated with the use of adulterant by milkmen. The Information sub-system: The absence of effective market information flows within the milk supply chain inhibits feedback from the market apart from price information which is determined with the supply and demand situation. The Value sub-system: There is a variation in the prices at the producer, milkmen and milkshop. There is no system at all to control milk quality. The Governance sub-system: The dominant role of milkmen may be reduced by enhancing the share of processed milk.

The Domestic Retail Processed Dairy supply Chain

Third party collection on commission Rural Dairy Producers (Rs. 16-18/kg) basis (Rs. 2/kg) Collection, processing, packing and distribution charges about (Rs. 19-22/kg)

Urban Consumers (Rs. 42/kg) for different brands

Self collection on Self the collection basis of on the basis of fat (Rs. 5/kg) fat (Rs. 5/kg)

Constraints of Retail Processed Milk Supply Chain

The product sub-system: Consumers complaints about the taste of processed milk (unhygienic handling, storage and transport system of milk collected by third party adulterants by third party). The Information sub-system: The absence of effective market information flows within the milk supply chain inhibits feedback from the market apart from price information. The Value sub-system: There is no price variation for different brand of milk The Governance sub-system: Multinational and private companies charges too much for the collection, processing packing and distribution high price.

Supply/Value chain for Smallholder Milk Farms

11 buffalo farm Farm gate price =US$ 16.70/100kg Cost of production =US$ 10.76/100kg Profit = =US$ 5.93/100kg

World Bank 2006

Comparative dairy development 2006-07

Indicators
Human Population (Million) Dairy farmers (Million) Milk production million ton/yr

India
1122 70 101

Pakistan
160 14.7 38.37

Milk production million lit/day

Ave. Ann. Growth Rate Pe Capita milk availability kg/yr Milking population (m): Cattle (*2003 for india) Buffalo Milk productivity: kg/a/lac *(2004) Cattle Buffalo

276
4% 90 35.8* 33 987* 1450 10-11 45 (18%) 748 81.3

105
4.93 207 8.72 10.22 1195 1909 9-12 2.72 (3.23 %) 24 0.18

Cost of Production $/100kg milk Dairy Plants throughput m lit/day Dairy plants # Capacity m lit/day

Value of output US$ Billion

50.50

12.38

Allocation of development funds for livestock projects

Pakistan Fed Govt Punjab NWFP Baluchistan Sindh Pakistan Total Cost 5.28 6.62 0.89 0.26 5.93 18.98 %age of total 27.8 34.8 4.6 1.3 31.2 99.7 Projects # 7 27 11 16 21 82

Federal Govt.: one project costing Rs. 199 million is donor assisted (EU), 1 is project on Avianinflunza, 2 on health components, 1 on animal production Bulk of funds (83%) goes to thee Dairy, Meat and extension Punjab Govt. out of 27 projects 16 (86% funds) on animal production aspects, 6 on animal health, the largest project is on establishment of milk processing plants and milk collection centers at Layya and Sialkot costing 1.15 billion rupees NWFP Govt. out of 11 projects 5 on animal production and on animal health Balochistan Govt. out of 16 projects 9 on animal production, on Vet. Facilities Sind Govt. 87% funds fo animal production with very little for animal health

 Poor quality of fresh milk & high price of processed milk

How quality fresh milk and cheaper processed milk can be ensured to consumers?

ISSUES OF DAIRY PAKISTAN

Small scale and subsistence dairy farming system (80% of milk)

How participation of SF in modern value chain be guaranteed?

Limited physical farm performance: Poor genetic and

reproductive efficiency, epidemics of infectious diseases, inadequate feeding and ineffective vet. Cover-- low milk yield Week financial farm performance: Low milk prices, constraints on milk marketing and distribution Underutilization of dairy industry as at present working at 50% of installed capacity processing only 3.23% of milk. Institutional and regulatory issues: Poor investment in infrastructure, establishment and implementation of livestock legislation

There is need to Clarify the issues that are holding back dairy industry development and role of government

OBJECTIVES OF THE PROJECT

To assess the effects of vertical
coordination on transaction costs and farm profitability of smallholders in dairy, horticulture and poultry sectors

To identify different forms of integration

that could sustainably improve wellbeing of small holder farmers in dairy, horticulture and poultry value chains
smallholders, agribusiness, public policy and investment priorities.

To determine the policy implications for

METHODOLOGY
Field surveys (sampling and questionnaire
development)

Analytical techniques - The Value chain

approach
Transaction cost SCP of value chains for HVA Logit model for participation assessment of smallholders/effects of value chain on smallholders SWOT analysis by ranking techniques for strategic options to integrate the smallholders into value chains

PROPOSED CASE STUDIES

Commodities Milk Multinational Nestle Coop/Growers associations Halla Domestic-Private sector Haleeb, Noon, Chaudry dairy etc.

Sample Distribution
Items
PRODUCTION & MARKETING i) Multinational ii) Cooperative/ Associations iii) Domestic-Private Sector Contact Farmers Non-Contact Farmers Total Farmers

Dairy
200 200 200 600 300 900

PROCESSORS CONSUMERS

10 1200

Sampling Criteria
Dairy Sector Sheikupura & Kabirwala: Nestle milk area; 100 km radius; 20 Multinational villages 10 regular milk supplier to Hella and 5 non-contact = 300) Nestle Cooperative Hella Private sector Kasur & Okara: Hella milk area; 100 km radius; 20 villages; 10 regular milk supplier to Hella and 5 non-contact = 300) Jhang & Sargodha: Dairy Choudhry milk area; 100 km radius; 20 villages 10 regular milk supplier to Halla and 5 non-contact = 300)

Expect Impact of Research

The proposed research is expected
to contribute to an increased understandings of value chains for HVA products in Pakistan; to provide new ideas for improving the integration of smallholders, small and medium enterprises, and the smallholders with value chains and to assist in policy dialogue related to making markets work better for the smallholders.

Expected Output
Analytical papers contributing to an increased

understanding of value chains for HVAP Specific output for Policy Implications:

Policy directions to strengthened vertical linkages for

Assist in policy dialogue to make agri. Markets work

better for small farmers

greater involvement of SF in the process of cutting down transaction costs and improving marketing efficiency Needed policy changes for promoting supper markets and retail food chains to benefit SF and consumers Needed policy changes for investment opportunities in value chains, instt. Building and infrastructures